U.S. Stock Indexes Edge Lower Before Key Inflation Data and Fed Meeting

U.S. stock index futures dipped on Monday as investors awaited crucial inflation data and a Federal Reserve meeting for clues on the central bank's policy stance. Last week's conflicting economic data tempered expectations for rate cuts, with the week's market gains led by the tech sector.

U.S. stock index futures edged lower on Monday as investors moved to the sidelines ahead of key inflation data and a Federal Reserve meeting scheduled for this week, awaiting clues on the central bank's policy-easing stance this year.

Indexes had closed slightly lower on Friday after conflicting May data last week showed that Nonfarm Payrolls numbers were stronger than expected, unemployment had ticked higher and household surveys revealed signs of weakness in the economy. Markets dialed back expectations for interest-rate cuts by the Federal Reserve in September after Friday's data, with pricing now reflecting a less-than-50% chance of a reduction. Expectations had risen as high as 69% last week.

Interest-rate traders also trimmed expectations for the amount of easing this year, with pricing implying just one cut versus two prior to the payrolls data, according to LSEG data. Despite the back-and-forth on a rate reduction, all three major indexes ended the last week higher, with the Nasdaq gaining 2.38%, the S&P 500 up 1.32% and the Dow adding 0.29%.

Weekly gains were led by a nearly 4% rise in the S&P 500's information technology sector, which spearheaded recent Wall Street's rallies after stocks such as chipmaker Nvidia's, seen as a strong AI bet, soared. Attention now turns to the Consumer Price Index inflation data for May and the conclusion of the Fed's two-day policy meeting, scheduled on Wednesday, when the central bank is overwhelmingly expected to hold rates steady.

"The main focus will be their updated dot plot... with inflation having remained sticky and the latest jobs numbers beating all expectations, we expect them to push their projections for rate cuts back so they end up with two cuts in 2024 and four in 2025 instead of three and three," analysts at ING said in a note. J.P.Morgan said in a client note on Friday it now expects the first rate cut in November, rather than July, as previously anticipated.

Producer Price Index data for May and the first release of the University of Michigan's consumer sentiment survey are also due this week. Nvidia was flat in premarket trading in the wake of a 10-for-one stock split that went into effect after markets closed on Friday.

At 7:07

a.m. ET, Dow e-minis were down 76 points, or 0.2

0 %

, S&P 500 e-minis were down 6.25 points, or 0.12%

, and Nasdaq 100 e-minis were down 13.75 points, or 0.07%

. Southwest Airlines jumped 6.9% after a report that activist investor Elliott Investment Management has built up a nearly $2 billion dollar position in the company.

CrowdStrike, KKR & Co and GoDaddy rose between 2.9% and 7.7% after S&P Dow Jones Indices said the companies would be included in the S&P 500 as of June 24. Diamond Offshore Drilling added

7.7 % after oilfield services firm Noble said it would

buy the smaller rival in a $1.59 billion deal.

Moderna climbed 1.4

% as its combination vaccine against COVID-19 and influenza generated a stronger immune response

in adults 50 and over in a late-stage trial, compared to separate shots. Advanced Micro Devices dropped 2.3% after Morgan Stanley downgraded the chip stock to "equal weight" from "overweight".